The Chicago Board Options Exchange (Cboe) announced that it will not list upcoming Cboe Bitcoin (“XBT”) futures contracts for trading in March 2019.

The Cboe Futures Exchange said that the company is “assessing its approach with respect to how it plans to continue to offer digital asset derivatives for trading,” stating that it has no intention to list additional contracts for trading relating to the cryptocurrency.

Though it is not confirmed, the reason behind Cboe’s futures closing might be due to its underperformance in comparison to CME’s futures contracts.

The Chicago Board Options Exchange first listed its Bitcoin futures on December 10, 2017, preceding the listing of the Chicago Mercantile Exchange’s futures on December 17 of the same year. The two contracts went live shortly before the price of bitcoin began to dip from its all-time high of over $19,000.

After listing its Bitcoin futures, Cboe filed multipletimes with the U.S. Securities and Exchange Commission (SEC) for the approval of several Bitcoin ETFs, none of which have been approved.

Critics of the Cboe futures, which were cash-settled contracts (no physical delivery of bitcoin), claimed that the financial activity that these types of contracts created had a negative impact on Bitcoin because they did not involve the movement and transfer of physical bitcoins on-chain, therefore suppressing its price.

“They are both cash settled, meaning that two players trade against each other based on the price, and the loser forks over USD to the winner, so bitcoin is never moved by this market,” said Greenspan

On March 9–10, 2019, the Massachusetts Institute of Technology hosted a two-day event, the MIT Bitcoin Expo 2019. Put together by the student-organized MIT Bitcoin Club, the conference welcomed more than just Bitcoin voices from every corner of the industry. One of those voices was that of U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce.

Peirce sat down with Gary Gensler, ex-chairman of the Commodity Futures Trading Commission, senior lecturer at the MIT Sloan School of Management and senior advisor to the director of the MIT Media Lab, to discuss the progress of the SEC’s efforts to regulate the cryptocurrency industry. Notably, Gensler and Peirce launched into a discussion on what regulators can do better to protect investors from fraud and malicious actors.

Before the debate began, both Gensler and Peirce expressed their appreciation for the emerging technology. “It’s a new way to have tamper resistant data amongst the consensus of multiple parties,” Gensler said. “My research is mostly around the business of blockchain technology and … trying to find where are the real use cases where traditional data structures don’t work as well.”

Peirce expressed her own support for the space in relation to the SEC’s ongoing efforts to properly regulate it. “We have rules on the books that we have to enforce, but on the other hand, we don’t want to stop people from doing things that are going to make society a better place to live, that are going to make people’s lives easier, and enable people to interact in ways that they have not been able to in the past.”

Later in the presentation, the two veteran regulators went on to discuss what the government can do to protect investors by possibly regulatinged cryptocurrency exchanges.

Gensler believes that “exchanges are the gateway to get good public policy, particularly around AML laws, but also around investor protection.” He continued, “In essence, that there’s not a manipulated market with frontrunning and manipulation with the order books and the like.”

The discourse was ongoing, and the most significant takeaway was that regulators like Peirce and the SEC acknowledge that, again, perhaps the current system of rules don’t apply perfectly. How could securities-based regulations be placed on all cryptocurrencies, even those that are officially defined as not securities?

The SEC, according to Peirce, is working on what may be an alternative set of rules for exchanges that do not violate the rules of listing unregistered securities. Bitcoin, which is not a security, falls neatly into this alternative rule set. And, though it is currently unclear what the exact precedents will be, Peirce’s thoughts around the subject at MIT’s latest Bitcoin Expo were nothing short of encouraging for Bitcoin’s regulatory future.

“People regulate each other in their interactions with one another, and that’s sort of the whole purpose of the Bitcoin idea … that it would be this community that would be able to regulate itself. So as problems arise, people in the community are thinking about how to deal with those problems.

“I think these markets could regulate themselves if we lived in a world that allowed that,” Peirce added.

Peirce has made similar remarks about the SEC’s awareness of the Bitcoin community’s tendency to self-regulate in the past.

Gensler and Peirce also discussed the topic of initial coin offerings (ICOs) and what is being done to provide clarity to people participating in the once-booming phase. Peirce went on to explain that the SEC has already provided some clarity for investors who want to create a company, raise funds from investors and then distribute returns based on the company’s performance. For these individuals, the existing securities rules will apply to their tokens.

There are, however, the countless number of tokens that claim to be used as a utility on the network they belong to, but originate through an ICO in which they accept funds from investors in exchange for these tokens. There are still a plethora of unanswered questions around these.

“That’s where we need to do a better job,” Peirce said, “in providing guidance in how does it change from one thing to another.” Eventually, she said, the SEC wants to remove the big gray cloud hanging over these project’s heads.

Overall, the uplifting theme of the entire discussion could be summarized by an exchange between Peirce and a member of the audience, addressing the current system that discourages equal opportunity in retail participation.

The audience member asked, “It may be hubristic, but many of us are not independently wealthy and we still believe we can make good investment decisions, and right now we’re excluded from participating. How can we move the accredited investor laws away from wealth thresholds and toward something that’s far more reasonable and accessible to mainstream investors?”

“Our accredited investors rules … I personally think those rules are not consistent with what this country is about,” Peirce admitted, “which is about people taking opportunities, taking their talents and intelligence and applying it to make their lives better. We’ve put this artificial barrier in place so that people can’t do that.”

As far as whether or not these opinions will translate into legislature, time will tell. The entire MIT Bitcoin Expo 2019 livestream recording can be viewed here.

In January of 2019, student Conner Brown attended a guest lecture by a Professor Susan Athey at the University of Stanford Graduate School. She gave a presentation to his “Evolution of Finance” class titled “Blockchain and the Future of Finance.” According to Brown, the presentation contained “multiple misstatements” about Bitcoin and its fundamentals.

After the presentation, Brown was dissatisfied with how Bitcoin was referenced by Athey during the lecture to a room comprised (mostly) of people who were unfamiliar with the fundamental concepts behind the technology. This prompted him to write an email to the Stanford Graduate School Board, expressing his concerns.

Brown says that the only response he has received from the university thus far is an email stating, “We will get back to you on this.” That’s when he posted his complaint on Twitter.

What She Got Wrong

Athey, who Brown told Bitcoin Magazine is also slated to teach an entire course at Stanford next semester called “Cryptocurrencies,” claimed that not only is Bitcoin “controlled by a small group of miners in China,” but that it also “wastes electricity by stealing from rivers to solve useless math problems.” Athey also mentioned that bitcoin is “secured economically and not cryptographically.”

In her presentation degrading the first digital, decentralized currency, Athey drew comparisons to what she considered a better solution in Ripple’s technology, using XRP. Specifically, she cited exchange rate volatility, trust issues with exchanges, and long transaction times as drawbacks to using Bitcoin (stating that, subsequently, exchanges needed to buy bitcoin). Athey then, according to her presentation, explained how Ripple’s XRP, xRapid API, and overall consensus mechanism provide an alternative that is faster, cheaper, more secure, and more energy friendly than Bitcoin.

In protest, Brown composed a letter addressed to the Graduate School of Business, expressing his thoughts that certain statements about Bitcoin should have been subject to “high caliber discussion and peer review.”

Addressing her claim on mining centralization by a small group in China, Brown explained that Athey was conflating mining nodes with full nodes and had used this misrepresentation to position Ripple as a better alternative to Bitcoin. He also countered by explaining that miners often compile their resources together in a mining pool, but there are many individual miners in these pools and not one entity can completely control Bitcoin.

To Athey’s claim that Bitcoin is secured economically and not cryptographically, Brown pointed out that she is once again conflating two different things: Stealing funds by cracking the encryption of the wallet and using mining power to 51% attack a network.

Conflict of Interest?

As the matter came to light on Twitter, it was pointed out that Athey was welcomed to the Ripple Labs Board of Directors back in April 2014, where she still maintains an active role. When Nic Carter asked on Twitter if Athey had made any disclosure before her presentation, she replied directly: “Five minute verbal introduction discussing my background in the space — no way to miss it!”

Whether or not Athey had any ill-intent in her presentation, Brown told Bitcoin Magazine that is not what mattered to him.

“It concerns me that my classmates’ first introduction to Bitcoin contained severe factual errors along with strong anti-Bitcoin rhetoric. The academy is not a place for marketing, but rigorously testing ideas. If a professor has a potential conflict of interest, they should be held to the highest standards of scrutiny and peer review.

“That being said, Bitcoin is a creature of the internet. Its properties are difficult for academics to appreciate due to its deeply interdisciplinary and evolutionary nature. This makes it difficult for developing a curriculum because of the siloed design of academic disciplines and the slow pace of the peer review process. The internet will always be the best place to pursue a Bitcoin education.”

Patreon has been making the case for censorship-resistant money increasingly apparent.

The platform allows members to contribute to artists or creators that they support. These contributions are made via standard payment methods like credit cards.

Over the past few months, there has been an increase in public outcry over multiple separate instances where Patreon has removed creators from its platform. BitPatron, a Bitcoin-friendly version of the website, has recently come to the surface as a possible alternative.

A Series of Bans

One of the first well-known bans dates back to August 2018 when James Allsup, a far-right political commentator, was banned from the funding platform.

In December, a wave of media attention ensued when another alt-right activist and spokesperson, Milo Yiannopoulos, was shut down almost 24 hours after he had set up an account to fund his “magnificent 2019 comeback tour.” Patreon’s reasoning for removing Yiannopoulos’s account was due to his past association with the Proud Boys, a violent, far-right political group (whose founders were kicked off of Facebook and Twitter recently as well).

Another notable example occurred when Patreon had to close an account against their will when Mastercard required them to remove the account of Robert Spencer, a political activist and author of several “counter-Jihad” books.

In response to Spencer’s removal and other account bans, Jordan Peterson, professor of psychology at the University of Toronto, and David Rubin, creator and host of The Rubin Report, announced they were leaving Patreon because of the way that the platform has handled these situations.

Bitcoin and BitPatron

Bitcoin is a censorship-resistant currency. One of its many valuable attributes is that nobody can tell anyone what they can or cannot do with their bitcoin. As long as someone is able to receive bitcoin (which, by design, is very easy to do), no transaction from anywhere can be stopped.

BitPatron is a direct response to Patreon’s proclivity to censor content on the platform. It will offer a similar crowdfunding platform as its predecessor, but will allow users to support creators with bitcoin.

By using Bitcoin and Lightning as payment methods, BitPatron expects to offer lower fees than its competitor. BitPatron’s payment processing system is built on top of BTCPayServer, an open-source payment processor for Bitcoin and Lightning. According to the website, there is no minimum pledge amount, compared to Patreon’s $1 minimum. Total fees for the platform are 4 percent, much lower than Patreon’s 10 percent.

The platform’s co-founder believes that, more than just offering users a lower fee competitor to Patreon, BitPatron’s focus on bitcoin is about free speech.

“Patreon publicly admitted that Mastercard required them to remove accounts. This is where Bitcoin and BitPatron come in. Bitcoin is censorship-resistant, free-speech money, and BitPatron is taking a leading role at building a Bitcoin-based, censorship-resistant platform that gives the power back to the community where it belongs,” Vin, co-founder of BitPatron, told Bitcoin Magazine.

But BitPatron is still not a completely, “anything goes” platform yet. A spokesperson for the company told Bitcoin Magazine: “For now, we are planning to monitor and block only in extreme cases, such as illegal pornography, threats or calls for violence, or terrorism-related content.

He added that ideally, in its purest form there would be no centralized control, but there’d be some sort of decentralized algorithm to perform the necessary checks. “That’s why we are considering blockchain platforms that would allow users to self-host their content and be responsible for it.

“We want to remain a platform for every voice, which is, in our opinion, a far greater task than monitoring ‘hate speech.’ We therefore need to make sure that the platform remains interesting for voices of the entire spectrum.”

Who Is It For?

BitPatron will first allow podcasters and video creators to offer exclusive content to their supporters, and it also has plans integrate with Discord groups to support chat rooms.

In the bigger picture, a platform like BitPatron could support content creators from all walks of media. It is a platform where people receive financial support from others all across the world in a seamless and instant way with a censorship-resistant currency.

Coinify, a European-based financial platform that provides a wallet, trading and payment processing solution, has announced that they are integrating BRD Wallet into their platform to deliver BRD wallet access to users across the European region.

Specifically, the partnership provides access to virtual currencies, like bitcoin, to 34 countries across the Single Euro Payments Area (SEPA). The SEPA region is a collection of member states in Europe who are part of a payment system that simplifies bank transfers denominated in EUR. The launch is also enabled largely in part by Coinify’s newly rebranded trading solution for wallet partners.

Customers will now be able to use BRD Wallet to “purchase bitcoin at cost-efficient rates with SEPA bank transfers” within Coinify’s trading platform. With BRD integration, customers will also retain control over their private keys while using Coinify.

Essentially, this provides a large number of users with an efficient and secure way to buy bitcoin and other cryptocurrencies, and then allows them to immediately store it in a manner where they control what happens to their money. Typically, a user will entrust the custody of their private keys to a centralized exchange while they are waiting for trades to be executed and sometimes for much longer than that.

Aaron Lasher, co-founder and chief strategy officer at BRD, highlighted the advantages of the integration for security-focused users of the Coinify platform.

“We like exchanges and think security will get better in the future, but by using our integrated purchase and trading solutions, you get to keep your funds under your control 99 percent of the time, and only put them at a slightly higher risk for a short period when you make the exchange,” Lasher told Bitcoin Magazine.

“Using a non-custodial wallet means that you and you alone control your funds. It’s similar to having physical cash in a (highly secure) safe at home. Only in this case, we provide our customers a digital safe (the BRD wallet) that they can keep in their pocket and carry along. Nobody else in the world has access to your funds but you, and nobody can stop you from sending or receiving funds.”

Integrating a wallet that allows users to own their funds and seamlessly make trades on a platform like Coinify could help to push bitcoin adoption forward.

“The financial industry is ripe for disruption and we see bitcoin and the other virtual currencies as the future of payments,” said Rikke Stær, chief commercial officer at Coinify, told Bitcoin Magazine. “At Coinify, we have experienced first-hand the rising adoption of bitcoin and working with BRD as a user-friendly, decentralized wallet will only encourage the global reach of the currency.”

“Since launching as the first iOS bitcoin wallet in the App Store over 4 years ago, we’ve grown tremendously in North America,“ Adam Traidman, CEO and co-founder of BRD, said in a statement. “Europe will be strategic in the next phase of BRD’s global growth, and the partnership with Coinify will ensure our success in this crucial endeavour.”

In August 2018, Canadian-based Coinberry exchange launched a similar BRD integration, allowing users to quickly and seamlessly buy, deposit and withdraw bitcoin on the Coinberry platform, while keeping control of their keys at all times.

Bitcoin is an open-source protocol that anybody can interact with. It is getting attention and attracting participation in different ways, whether it is through speculation, investing and sending money, all the way to contributing to what’s underneath the hood. The entire Bitcoin repository is on GitHub, inviting any developer to see the protocol’s code and perhaps contribute toward solving existing problems if they can.

A noteworthy fact, however, is that the pool of developers today is quite small.

“It’s not an easy field to get into,” Jimmy Song, author of Programming Bitcoin and instructor at Programming Blockchain, told Bitcoin Magazine. “Interestingly enough, the thing that makes Bitcoin hard to get started on is the cryptography, and that’s hard because the math is not familiar to developers. Specifically, finite fields and elliptic curves.”

Some would argue, though, that the small number of developers in Bitcoin today is not too small. In fact, it’s perfectly fine at the size it is for such a new industry.

“Bitcoin has only been around for 10 years, and it only started getting a lot of mainstream attention in 2017, so it hasn’t been a long time to build up an ecosystem of developers,” said John Newbery, a Bitcoin Core developer and Bitcoin engineer at Chaincode Labs.

“It’s something that we hear a lot, that it is difficult to find experienced Bitcoin engineers … [Bitcoin] really only started getting mainstream attention two or three years ago, so it’s as expected. We’re doing everything we can at Chaincode to widen and deepen that pool.”

Even outside of developer knowledge, there are many aspects of various fields of expertise that require a significant level of understanding in order to grasp Bitcoin all around. Since there are so many paths that need to be explored, the question is: Where do you start?

It is important to be realistic and realize that a complete understanding of the digital currency will always be unreachable.

“I don’t think it’s possible to understand all aspects of Bitcoin,” Newbery said. “The frontiers are continually being pushed forward so having ‘proper education’ that covers the entire Bitcoin space is a constantly moving target.”

Perhaps a better approach to answering this question requires going back to the very first Bitcoin educator himself, Satoshi Nakamoto. How did Nakamoto introduce something like Bitcoin for the very first time in his white paper so that as many people as possible could understand?

Nakamoto seems to have realized that the best way is to break down concepts separately, explain why they do or don’t work individually, and then tie all the strings together at the end.

A Few Examples in Action

BUIDL Bootcamp

One such solution that presents a similar approach has presented itself in the form of Justin Moon’s BUIDL Bootcamp, a grassroots effort by Moon that aims to educate “HODLers” about Bitcoin beyond the basics. Similar in structure to Bitcoin’s white paper, Moon’s four-project curriculum, starts with “How Bitcoin Works.” The first BUIDL Bootcamp class is already halfway complete.

Similar to how the white paper first introduces transactions, then explains timestamp servers and proof-of-work systems before putting all the pieces together, Moon’s curriculum takes a progressive, constructive approach.

Project 1 starts with students making what’s called a “PNG coin.” This is not a coin at all, instead it is a .png photograph of a paper signature with a message, like “I, Alice, issue 10 coins to Bob,” with a signature below it. Just as Satoshi Nakamoto introduces each of his concepts and proceeds to explain how alone they are subject to failure, Moon then shows his students how, with such a simple .png concept, it is easy to double spend transactions.

Eventually, the course introduces digital signatures to replace these image coins and introduces further concepts in a gradual fashion to teach similar lessons about why Bitcoin was built the way it was. All of this, is also only in project one out of four.

One of the most surprising things about the bootcamp is the extent to which people who had little programming experience were able to follow the course.

“We’ve had a few people that had no prior programming experience besides an introductory programming course, like Code Academy, and we’ve had them get all the way through building an 800-line ‘mini bitcoin’ that has all the main features,” said Moon.

Chaincode Labs

The efforts at Chaincode are working toward a similar goal of educating about Bitcoin. Also a bootcamp-style learning course, Chaincode accepts a select number of applicants to go through a multiple-week course about Bitcoin-related technologies. Their developer-focused initiatives educate about the entire Bitcoin system, with residencies covering topics from the actual protocol to second-layer technologies like Lightning.

“We’ve done two versions of the residency focused on Bitcoin Core and Bitcoin, the protocol. And then we did the Lightning residency last year,” said Newbery.

Adam Jonas, who leads the education initiative at Chaincode, added, “We’re also planning a little bit longer residency this summer, a three-month residency, which is much longer than anything Chaincode has run in the past. It is probably an opportunity to sort of fuse both the lecture series and onboarding efforts that we’ve done, along with some project-based work. So hopefully getting the best of both worlds.”

Qtum, a blockchain platform that merges the strength of Bitcoin’s blockchain with the Ethereum Virtual Machine to build decentralized applications, has completed its first atomic swap with Bitcoin on mainnet.

This is a big, first step for atomic swaps, a feature that allows for on-chain exchanges, or transactions, between cryptocurrencies on two separate blockchains without the need to rely on a third party. For Bitcoin, this is a big step forward in allowing interoperability between other blockchains and itself in a trustless manner.

Atomic swaps are not an entirely new feature, as Bitcoin Magazine has reported on a Lightning Network ERC-20 swap with bitcoin just a few months ago.

According to Qtum’s blog post, the main solution that makes atomic cross-chain swaps possible is Hash Time-Locked Contracts, or HTLC. In a brief summary, HTLC essentially locks up the funds in a transaction for enough time so that both blockchains are able to confirm the transfer of funds on their own (via block confirmations) and gives both parties time to claim their funds. If enough time passes where one side has not claimed their funds, everything is returned back to the original parties.

The entire process of the atomic swap is described in the blog post as follows:

Alice initiates a transaction on Qtum which contains a time-locked contract and transfers QTUM to Bob.

Bob audits the transaction.

If the transaction is approved, Bob participates in a similar transaction on Bitcoin which pays BTC to Alice.

Alice audits the transaction.

If the transaction is approved, Alice redeems BTC from it.

Bob extracts a secret from the redeeming transaction.

Bob redeems QTUM from the initial transaction.

If the time specified in the time lock is reached and Bob has not redeemed the token, Alice can refund the token.

In the last year, Qtum has made significant leaps forward in developing its blockchain for greater adoption and interoperability as well. Atomic swaps are just the next step.They are also a crucial, next-step feature for interoperability with the Lightning Network.

Why Are Atomic Swaps Important?

Atomic swaps solve a big problem in cryptocurrency, which is the inability to directly exchange two different types of currencies with each other without having to rely on a trusted third party like an exchange or company.

In a present example, let’s say Alice wants to buy a digital collectible from Bob, and there is no way to trade in person. If Alice wants to send money to Bob for a collectible, Bob could easily receive the funds and not send the collectible in return. Also, the opposite could happen, where Bob sends the collectible first and Alice never sends the money in exchange.

The problem in the present example is the factor of trust. When trust is factored into the risk of exchanging things online, it becomes much more risky. Atomic swaps are a solution to this problem, as described above, because they allow funds to be exchanged between parties without having to rely on anything but mathematics to ensure the process has been completed smoothly.

For investors whose first time investing in bitcoin was in 2018 or after late 2017, there is a high likelihood that they have incurred substantial losses for the fiscal year of 2018 if they haven’t sold yet. On December 17, 2017, bitcoin hit an all-time high at over $19,000. Thereafter, it has fallen over 80 percent and now hovers at around $4,000 at the time of writing. While losing money is never the end goal, there are certain measures investors can take in order to minimize their taxable income by utilizing their capital losses incurred from bitcoin during the current year and going forward.

Before diving into what measures can be taken, it is first necessary to address how the regulatory bodies who set these precedences view bitcoin and similar assets. Although this piece is centered on the U.S. regulatory requirements applied to bitcoin, it is worth noting that many other countries have similar regulations internationally.

Bitcoin Is Property

According to the Internal Revenue Service (IRS), bitcoin is considered personal property. As such, any tax laws applicable to the sale of a house or car, or more similarly, a security, will also apply to the digital currency.

Specifically, the IRS refers to taxes levied on the sale of an asset as capital gains tax, for which there are two types. Long-term capital gains tax applies to profits on assets held over a year, while short-term capital gains taxes apply to assets held for less than a year. Short-term capital gains are taxed at the same rate as an individual’s ordinary income tax rate, which in 2018 was somewhere between 10 percent and 37 percent, depending on your level of income. On the other hand, in 2018, the long-term capital gains tax rates are either 0 percent, 15 percent or 20 percent. The applicable rate used for the calculation is dependent on the level of income.

However, in this article we are discussing the opposite of gains, as there are probably very few who profited in 2018’s bear market. Capital gains tax rates are relevant to taxing profits but not losses. The good news is the IRS allows individuals to lower their taxable income by applying these losses.

If You Sold Your Bitcoin at a Loss

Plenty of people bought bitcoin during the bull run last year. Some “bought the dip” at various points on the way back down, only to see the price slide even lower. And many discouraged investors sold their BTC at a loss along the way. For those short-term investors, there is the opportunity to claim back some of those losses.

Similarly, if an investor bought bitcoin any time between late September (the last time prices were this low) and December of 2017, it is likely they have losses for 2018 that can be used to lower their taxable income if they choose to sell now. This would lower the amount of taxes they will owe from the given year, as long as the asset isn’t bought back within 30 days (i.e. wash sale).

According to the IRS, the maximum amount by which an individual can offset their taxable income for a single year is $3,000. But, if an investor lost more than $3,000, the remaining losses can be carried over to following years up to $3,000 per year.

As an example, if an investor bought 1 BTC in late December at $17,000 and sold it at $4,000 today, they would recognize a loss of $13,000. The investor, who is assumed to have regular taxable income, can reduce their 2018 taxable income by a maximum of $3,000. The remaining unused portion of the capital loss in this situation is $10,000. The IRS allows $3,000 of that leftover $10,000 to be carried over into the next year to offset any capital gains that may be recognized at the end of 2019.

The Case for Hodling

While selling bitcoin at a loss could reduce taxable income in the short term, many proponents of bitcoin would be quick to point out that the case for holding onto the digital asset is much stronger than selling for such a marginal and temporary opportunity to save a few dollars in taxes.

There are many who believe that bitcoin will eventually become a store of value, or sound money, and that the best days of bitcoin’s price are yet to come.

However, it is unpredictable when, or even if, bitcoin will accomplish this feat. Because it is impossible to predict the short-term price movement of bitcoin, it could be argued that the case for holding for a very long time (commonly referred to as HODLing) points toward a much higher future price of bitcoin that would make selling today, for a relatively small, offsettable loss, a much greater loss in years to come.

This article is for informational purposes only and does not constitute tax advice. As always, contact a tax professional to be sure that you are acting in compliance with your local tax laws.

Yesterday, an auction was held by cryptocurrency and blockchain artist @cryptograffiti for a piece titled “black swan,” which the artist made using “fiat and counterfeit detector pen ink.” The artist, who became involved with bitcoin in 2013, held the auction on a website where users could only bid via Lightning Network micropayments, with the first person to bid the smallest amount being the winner.

Fully concluded, the auction attracted 77 bids to the tune of 182,252 satoshis (0.00182252 BTC). Cryptograffiti pointed out that 14 bidders connected to his Lightning node the day before the auction after he sent out a tweet hinting at the event.

The Inspiration

As he explains in a Twitter thread, Cryptograffiti created “black swan” for two reasons. The first, to poke fun at mainstream media’s focus on the less relevant aspects of Bitcoin like its price, instead of the groundbreaking technology being built. The title itself is a seemingly playful nod to the black swan event theory, an event that is unexpected yet has paradigm-shifting ramifications.

He also created the piece to help spread awareness about the Lightning Network.

“The promise of micropayments was instrumental in my becoming an artist in the space,” he says. He continues to explain that it was in 2012 when he first recognized the impact micropayments could have for artists. He even began attaching public facing wallets to his street art in 2013 as a way to allow for tips.

The Setup

To his own admission, the artist was not technically skilled in setting up the payment processor. He reached out for assistance to Twitter user @notgrubles, who he states was a crucial player in getting the auction off the ground.

With @notgrubles’ help, the artist chose c-lightning, a standard compliant implementation of the Lightning Network protocol, and, using this, they set up nanotip. Nanotip is a web server built on Lightning Charge, a Blockstream-designed software package that makes it simple to build apps on Lightning.

“In addition to nanotip/Lightning Charge, I bought a CasaHODL node, set up BTCPayServer with Zap, and integrated Globee for merch payments,” the artist added.

“As a non-programmer, I still don’t have a firm grasp on everything, but I know more than I did before making black swan and I’m excited to see great strides being made in UX!”

Lightning is a second-layer solution for the Bitcoin blockchain that addresses the scaling issues surrounding it today.

Similar to Bitcoin, Lightning is an open-source protocol in which anyone can contribute to. Whether it is through programming and developing applications or setting up a node, participation in Lightning is not just accessible. It’s welcomed.

The Lightning community is already vibrant and growing every day. Pierre Rochard is one person who has already cemented his place in the Bitcoin community as a strong advocate for the digital currency, founding the Bitcoin Advisory in 2013. More recently, his work with Lightning has garnered plenty of attention through his suite of Lightning applications. Specifically, Rochard’s Lightning plug-in integration for Microsoft Excel showed the world that Lightning has a place in commonly used applications.

The Lightning plug-in uses neutrino, a sidechain solution whose purpose is to allow for interaction with Bitcoin’s global transaction history without downloading the entire blockchain. Specifically, neutrino was designed to facilitate this on devices with low-power processors, limited storage or bandwidth, and intermittent power — essentially, a good fit for an Excel spreadsheet.

As for the use-case of this application, Rochard has mentioned in the past that it is for “power users” who are highly familiar with the technologies being used and not for the everyday user. Nonetheless, its general purpose is to send Lightning payments from an Excel spreadsheet.

Rochard’s suite of Lightning applications is a testament to the progress being made in developing Bitcoin’s second-layer solution in the first year of its existence. In the following interview with Bitcoin Magazine, Rochard discusses his Lightning plugin as well as the bigger picture of Lightning as it relates to the global adoption of Bitcoin.

In the months since he announced that this plugin can run a full node within the spreadsheet. Rochard has created a node launcher GUI to help people set up a Lightning and Bitcoin node locally for the plugin to connect.

“My initial experimentation with the Excel plugin was that it would have a Lightning node bundled with it and running inside of it, using Neutrino instead of a full node,” said Rochard. But there was a problem with that set-up. Neutrino is not implemented on mainnet, so it can’t be used with real bitcoins yet, meaning that no one would be able to use the Excel plugin with real bitcoins.

Neutrino versus Full Node

Instead, Rochard explains, the Bitcoin community has settled for “compromises that are SPV-ish.”

Right now, using this compromise process, a wallet will send a list of transaction IDs to a node and query all information relating to those transaction IDs. The trick is that not all of those transaction IDs that the SPV wallet is sending to the node are actually from the SPV wallet. Instead, the list includes a bunch of random information in addition to the actual queries it’s actually interested in. This action is meant to preserve some privacy since the node doesn’t know which piece of information is the specific piece it is looking for. It just knows it’s somewhere in there, hidden in a crowd of other bits of information.

Still, however, Rochard pointed out that few mobile wallets actually implemented this process. “Instead, most of them are basically contacting a trusted server that is just the specific addresses that its interested in and then it receives information back on this. So that provides zero privacy.”

With Neutrino, the full node sends what’s called a “block filter,” which is essentially a short summary of a bitcoin block, to the “light client” and checks if specific transactions or addresses of interest have a match in this filter.

“If they do,” said Rochard, “then we’re going to request the full block and download that and then extract the data from it. So that, essentially, means you have way more privacy because now the full node doesn’t know what specific transactions in that block got your interest because there’s thousands of transactions in a block.”

Of course, Neutrino isn’t as secure as the Bitcoin blockchain itself. Specifically, it doesn’t validate all protocol rules, it just checks the transactions in a specific block. In other words, it doesn’t verify the 21 million bitcoin limit, which opens up doors to compromises on security.

“I would strongly emphasize that there is simply no substitute for running your own full node,” said Rochard. “Really, the Neutrino functionality is kind of a convenience/UX improvement, but it it does compromise on the properties of Bitcoin.” That was the other motivation for this node launcher that Rochard created. He wants the people with the bandwidth capabilities to run a full node to be able to do so.

“I think that we should have the UI for every platform and in every programming language and we should really have as many UIs as possible. As it relates to which ones are going to be most used, that’s an area where I want maximum amount of competition and where really I embrace pluralism and would be against tribalism, which is unusual for me because I’m usually very tribalistic with my Bitcoin maximalism.”

When it comes to the Lightning UI, however, Rochard is far less “tribalistic.”

“I’m an alt-UI, Multi UI proponent, and the reason is that we’re going to want to onboard the full spectrum of users. From people who are using Lightning on their mobile wallet, to the people that are using Lightning in a Chrome extension with Joule to people who are using Lightning in an Excel spreadsheet with my plugin. Wherever the user is most comfortable and wherever it is most practical and simple for them, I want there to be a wallet for them.”

The Future of Lightning: Overcoming Bottlenecks to Adoption

“I think that Lightning’s adoption is going to basically mirror bitcoin’s adoption; and bitcoin’s adoption comes from a very grassroots source. It’s not like a top-down thing,” said Rochard. “We’ve even seen Bitcoin businesses emerge from grassroots users for the most part. Someone becomes a Bitcoin enthusiast [gets] into the ecosystem and then starts a Bitcoin-related service where they see a gap. That’s kind of been the general path.”

Rochard projects that the growth of Lightning will follow a similar path, but first, users will need tools that allow them to work with the protocol.

“You have people who are Bitcoin enthusiasts who are like, ‘Oh, what’s this neat, layer-two, offchain network that people are buzzing about on Twitter? I’m gonna go check that out. Now, I use Windows — I have no technical capabilities and I don’t know how to use a command line, so I can’t get on Lightning today. Oh, Pierre came out with a node launcher. Okay, now I can get on Lightning.’

“And that’s that’s how the process is going to happen. At first it’s going to be ten people, then a hundred people and then a thousand people.”

Adoption Through Infrastructure

Participating in a recent Lightning residency at Chaincode Labs was a pivotal moment for Rochard and turned him from being “cautiously bullish” to a “cult-member, indoctrinated-fanatic” of Lightning.

There, he met a software developer at Bitmex who gave the impression that, while Lightning was on Bitmex’s radar, it wasn’t a priority from a development perspective.

“Now within the next couple of years, they’re going to have a Lightning feature,” Rochard suggested. “That much is clear. So, I think that, you know, it’s not within the next six months but within the next few years, exchanges are going to have Lightning features.

“Now the question is: How useful are these? Because if it’s to deposit $20 worth of bitcoins, that’s not useful for anyone. On top of figuring out how useful this is for exchanges, it’s just too early right now. If we want thousands of dollars being transacted on Lightning in payments, we need to have atomic multipaths worked out among other things.”

Looking ahead, Rochard said that, when it comes to exchanges, Lightning adoption will continue to evolve; users will find themselves using bitcoin on-chain in the meantime. In the future, however, as the capacity of the Lightning Network increases, using Lightning for everyday transactions on exchanges will become automatic.

“In five years, it’s going to the the case that you’re no longer going to be able to use bitcoin at an exchange without using Lightning, but that’s much longer term.”